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September 13, 2008

POWER EMERGENCY: GOVT, OIL MAJORS SET FOR SHOWDOWN

Can the rules of a game be changed midstream? This is the poser that multinational oil companies are raising as the Federal Government is set to order them to divert a great percentage of their gas exports to the local market. This is part of the government's efforts to meet its power emergency target. Sources told the Nigerian Compass that the companies are set for a showdown with the government, noting that the plan will result in huge financial losses to them. The companies believe that the government's plan is "an ambush," and a "strange" introduction into their operational agreements with Nigeria. The plan, it was further learnt, will badly hurt the revenue targets of the companies. They are already exploring the options available to them, which may include litigation. State assemblies have begun to pass power emergency spending budgets, which will enable the Federal Government to spend $5.5 billion to complete various independent power projects scattered across the country. President Umaru Musa Yar'Adua is currently working on how to compel the international oil companies (IOCs) to divert a greater portion of gas from exports to domestic use. The plan has been acknowledged by the Economic Adviser to the President, Tanimu Yakubu, who said that to Yar'Adua, "emergency power declaration is about seizing gas from the exporting companies to meet our energy needs." Yakubu made the declaration during his recent visit to Moscow, Russia, to witness the endorsement of a Memorandum of Understanding (MoU) between the Nigerian National Petroleum Corporation (NNPC) and a Russian multinational company, Gazprom. He said: "The President has fulfilled all the necessary conditions precedent to declaring a state of emergency in the power sector. He has now stabilised power generation at more than 3000 megawatts (MW), his threshold before emergency power declaration which, for him, is about seizing gas from the exporting companies to meet our energy needs." Yakubu added: "Power output is now heading towards 4000MW. He would not tell it himself. He hates that he deserves accolades for being so performance biased." The Special Adviser on Energy, Dr. Rilwanu Lukman, also confirmed the development, disclosing that the government was in the process of reviewing "the oil contracts in place to provide for periodic review and renegotiation (and) that time has arrived." Presidency sources told the Nigerian Compass that Yar'Adua was particularly "convinced that more gas must be put into the domestic market to overcome chronic electricity supply problems, but the multinational companies, whose investments are based on exporting, are less convinced". The Federal Government Committee on Emergency Gas Supply Strategy to Power Plants and the Domestic Sector submitted that gas should be prioritised for emergency supply to power plants and homes. A source at the NNPC expressed doubts about the possibility of the President realising his plan, noting that some of his advisers are canvassing the discontinuation of some gas projects initiated by the Olusegun Obasanjo administration. Nigerian Compass front page.